Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Easing Geopolitical Risks Dump Oil Prices

Summary

Brent crude plunged over 3% on Tuesday, with prices slipped back from $67 to the local lows below $64.

The driver behind the sell-off was Trump who raised hopes of easing tensions with Iran and pointed to a potential progress with US - Iranian relations in the Middle East.

The additional downside pressure came from Trump’s threat of new tariffs on China, which rekindled fears about demand.

    Brent crude plunged over 3% on Tuesday, with prices slipped back from $67 to the local lows below $64. Today, the futures are making shallow recovery attempts but the impetus is subdued and downside risks persist.

    The driver behind the sell-off was Trump who raised hopes of easing tensions with Iran and pointed to a potential progress with US - Iranian relations in the Middle East. Moreover, Secretary of State Mike Pompeo said Iranians were willing to negotiate their missile program. Against this backdrop, traders rushed to price out the geopolitical premium in the market, which resulted in a sharp retreat in oil prices.

     The additional downside pressure came from Trump’s threat of new tariffs on China, which rekindled fears about demand. Besides, the API revealed bleak inventory data which curbed expectations ahead of the official EIA data due later today. At this stage, Brent will hardly be able to stage a sustainable recovery as traders continue to fear further progress in relations between Washington and Tehran.